Funding Formula

Alun Cairns Excerpts

Tuesday 18th January 2011 Westminster Hall

[Alun Cairns (Vale of Glamorgan) (Con)]

It is a privilege to serve under your chairmanship, Mr Dobbin. Before the debate started, I forewarned you that I may have to leave early because of my Select Committee responsibilities, and I apologise for that.

I congratulate my hon. Friend the Member for South West Bedfordshire (Andrew Selous) on securing this debate. I recognise and support the spirit in which he has raised this sensitive matter, which affects all the nations and regions of the United Kingdom. He has underlined the point that we have a reforming Government and that bold steps need to be taken to come up with a formula that will serve all the nations and regions in a positive and constructive way that is dependent on need. The debate has been going on for some time in Wales. Even before the evidence was as stark as it is now, there was a view that relative deprivation in Wales meant that the Barnett formula was not serving Wales well.

A mathematical formula, such as the Barnett formula, offers significant advantages. The first advantage is that it offers a guarantee of funding, particularly to devolved Administrations, who need such a guarantee to plan, which prevents, for example, the Welsh Assembly Government, or the Wales Office on its behalf here in Westminster, becoming involved in horse trading year on year. Such a mathematical formula obviously offers that guarantee. The second advantage is that in times of limited or reduced spending, the Barnett formula offers protection to the devolved Administrations.

On the other hand, there are significant disadvantages with the formula being so far out of date, and I regret the time that it has taken to get to this point. The previous Government should accept their responsibility for leaving it so long. Despite Lord Barnett’s strong view that the formula needed reform, it was not accepted. He plainly said that the formula was unfair.

[Hywel Williams]

My memory of that slightly pre-dates the hon. Gentleman’s. I draw his attention to numerous debates over many years when Front-Bench spokesmen on both sides used the formulation, “The Barnett formula serves Wales well.” The hon. Gentleman should concede that both Conservative and Labour Governments were staunch defenders of the Barnett formula. My party, of course, took another view.

[Alun Cairns]

I shall square that point in a moment, but I do not want to let the previous Government off the hook for their delaying tactics in resolving the matter because of its sensitivity. Whereas Lord Barnett plainly said that it was not fair, the then Chief Secretary to the Treasury said that it was fair enough. That certainly was not good enough for Wales. I regret to say that despite 13 years in office, the previous Government did not have the opportunity to resolve the formula.

[Guto Bebb (Aberconwy) (Con)]

It is important to point out that back in 1999 and 2000, Wales, on average, received £125 for every £100 in England. In 2010-11, Wales receives around £112 for every £100 in England. Therefore, the Welsh treatment under the Conservative Government is significantly better than it was under the Labour party, when there was a significant decline in funding for Wales.

[Alun Cairns]

I will come on to the convergence in a moment. None the less, it is a point that is well made and that should be recognised by the Labour party. It is important not to confuse freedom of devolution, which enables nations to pursue their own policies, with funding. There is naturally a link, but because there is a policy, subsidy or generosity in one particular area, it should not then be used as proof or evidence of over-funding when we consider the whole context.

[Owen Smith]

I was rising to make precisely that point. Does the hon. Gentleman fear, as I do, that the hon. Member for South West Bedfordshire (Andrew Selous) will not be happy when we have a needs-based formula, because those examples that he cherry-picked earlier will still exist? The politics of envy, which underpins some of his concerns, will still play into this debate.

[Alun Cairns]

That point only demonstrates the hon. Gentleman’s misunderstanding of the spirit and tone of the debate presented by my hon. Friend the Member for South West Bedfordshire. My hon. Friend identified the differences, but recognised that that freedom needs to take place when we consider devolution. The obvious things in Wales are free prescriptions and—this one has focused attention of late—tuition fees. To those hon. Members who are critical of the Barnett formula because it is advantageous to Wales, I say that our NHS waiting lists are much longer and that the cancer drugs fund does not apply, so there are considerable drawbacks, and they need to be taken in the context of the whole funding settlement. It is far too easy to pick a policy that has been prioritised by the Welsh Assembly Government without accepting the areas that may not have been prioritised. Health is the obvious one. In England, for example, there is a guarantee of no cuts in NHS spending, whereas in Wales there will be real-term cuts and financial cuts to the health service. That point should be recognised in the debate.

My hon. Friend the Member for Aberconwy (Guto Bebb) has referred to the positive contribution of the Holtham commission. The two volumes of the Holtham commission can be brought down to a few figures. At the moment, Wales receives £113, which will drop to £112, for every £100 that is spent in England; Scotland receives £120; and Northern Ireland receives £124. Holtham concludes that Wales needs £115, which is marginally more than it is currently being awarded; Scotland needs £105, which is a significant reduction from its £120 now; and the figure for Northern Ireland is not far from what it already receives. That is the first needs-based assessment that has taken place. If that is not accepted in general terms, it is certainly an exceptionally useful starting point of where the needs lie.

The hon. Member for Arfon (Hywel Williams) has said that, historically, Wales has been underfunded by £300 million, but that fails to understand the convergence that has taken place over the past 13 years or more. That £300 million is the current level, and it would have been a much smaller level in the past.

A very good point has been made about Crossrail. Despite the view that the Labour party in Wales is taking at the moment, we can compare the spending on Crossrail with that on the Jubilee line. The spending on the Jubilee line was Barnettised, but the spending on Crossrail by the previous Government was not, which highlights another way in which Wales was treated unfairly by the previous Administration. It is far too easy to point the finger, when a real debate is taking place on satisfying the needs-based requirement.

My closing points—I am conscious of the time—relate to the way forward. All the nations and regions need to engage in the debate about this extremely sensitive area. Those who are allied with the Scottish National party are a block not only to any form of debate—that position is natural, because of the way in which Scotland would lose out—but to changes elsewhere in the United Kingdom. As the hon. Member for Arfon builds up a strong relationship with the Scottish nationalists, he must recognise that that is blocking reform in Wales, because every part of the UK needs to engage in this debate if we are to come up with a needs-based formula that satisfies all the nations and regions of the United Kingdom.